CEE FX: CNB dovish shift and NBP hawkish turn – ING

ING’s Frantisek Taborsky says the Czech National Bank’s dovish signal contrasts with expectations for at least two more rate hikes and a hawkish repricing. He sees EUR/CZK trading in a 24.350–24.400 range, supported by seasonal koruna strength despite renewed upward pressure. In Poland, the National Bank of Poland’s more hawkish stance may support the zloty, although global risk aversion remains the key driver of CEE currencies.

CNB cautious, NBP turns more hawkish

"The market interprets this as a dovish signal, suggesting the CNB is unwilling to hike rates further unless the inflation situation deteriorates significantly. For the first time since the onset of the US-Iran conflict, the CNB’s forecast aligns closely with market pricing, with the PRIBOR rate peaking at around 4.55%. However, inflation is expected to worsen over the remainder of the year, approaching 3% and nearing 4% in 27Q1."

"We do not believe the current shift in energy prices justifies such a rally in CZK rates. Consequently, we view two additional rate hikes as the minimum the market will tolerate, and we anticipate a hawkish repricing."

"EUR/CZK is facing renewed upward pressure. Indeed, if we take the shift in rate differentials at face value, the rates point toward 24.450."

"Furthermore, the koruna benefits from strong seasonal support in November and December, which should help temper the current weakening pressure following the dovish CNB meeting. We therefore anticipate a new range of 24.350-24.400, little changed from our pre-meeting expectations."

"For now, it is clear that the zloty may receive some support from the NBP’s shift toward a more hawkish stance. Nevertheless, global factors remain the primary driver; yesterday’s trading saw a rapid swing back to risk-off sentiment, renewing pressure on CEE currencies."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)